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LOTTERY ODDS - THE REAL STORY

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Posted by: Steve Player Admin on Saturday, November 30, 2019 at 12:00:00 am

LOTTERY ODDS – THE REAL STORY

    Make no mistake – the various State Lotteries are in business for one very simple purpose: to make money, and lots of it! How do they do this? By offering the public a game that is “stacked” against the players roughly 2 to 1. What that means is that for every dollar players spend on the Lottery, the State pays back an average of only 50 cents. How do they get away with this? Simple – by creating a monopoly! Running a Lottery or game of chance with a cash prize is illegal in the United States; unless of course you are part of the State government. Through creative legislation, 44 different States have adopted “legal” Lottery games, so in essence, they have created an industry which has no direct competition. By eliminating any semblance of a marketplace, they can entirely control the rules of the game, and consequently, initiate any and all determinations of how much of the money wagered is given back to the players. If that sounds shady to you, you are not alone, but this business model reaches even deeper into our pockets than most people realize.

    To better illustrate how our Lottery dollars are truly being ruthlessly diluted, let’s look at a real world example using a fictitious player by the name of Louie who likes to play the New York Lottery’s Pick-3 game. Louie is just an average guy who does not have a math degree or any deep knowledge of the games; he just likes to play the Lottery and hopes that he will win the $500.00 first prize for hitting a Pick-3 number in Straight (exact order) form playing his favorite numbers. Every week Louie buys twenty $1.00 Straight tickets, which means that after 1 year, Louie will have spent exactly $1,040.00 (52 Weeks X $20.00 = $1,040.00). Since there are exactly 1,000 possible Straight Pick-3 numbers in the game, probability tells us that he should statistically win the game once during the course of the year, or have one winning ticket out of the 1,040 tickets he will purchase.

    If we were to stop our analysis of Louie’s Lottery endeavor right here, then we could assume that Louie will spend $1,040.00 to win $500.00, right in line with a game that is stacked 2 to 1 against the player. But as you will soon see, things aren’t quite that simple. Let’s take a closer look at several other factors that will directly influence Louie’s bottom line. To begin with, in order for Louie to spend $1,040.00 on the Lottery, he first has to earn that money. We are of course assuming, for the sake of this example, that Louie is a gainfully employed, highly upstanding and tax-paying member of society!

    The average overall tax rate in America is 29.8%. This includes the combined average individuals share of Federal Tax, State & Local Tax, Social Security Tax and Medicare Tax. Therefore, in order for Louie to come up with his $1,040.00 wagering stake, he will have to earn exactly $1,482.00. This is where our truly revealing calculations will begin. After earning $1,482.00, Louie will have paid exactly $442.00 in taxes, which means that the government is already $442.00 ahead in this venture. At the end of the year, Louie will have handed $1,040.00 over to the New York Lottery and they will have rewarded him with a single Straight winning ticket worth $500.00. Since the New York Lottery is part of the New York State government, we can see that the government has now made $540.00 and Louie has made $500.00. So far the scorecard tells us that $500.00 has gone to Louie and $982.00 ($442.00 + $500.00 = $982.00) has gone to the government. That may sound like a raw deal for Louie, but I assure you that this story is far from over!

    Since Lottery winnings are taxed as earned income, Louie now has to pay taxes on his winnings. If we once again use the average tax rate of 29.8%, Louie’s prize of $500.00 will be distributed as $351.00 to Louie and $149.00 to the government. Therefore, the final scorecard at the end of the year now looks like this:

  • LOUIE EARNS $1,482.00 IN ORDER TO SPEND $1,040.00
  • LOUIE WINS $500.00 AND GETS TO KEEP $351.00
  • THE GOVERNMENT MAKES $1,131.00 ON THE ENTIRE TRANSACTION
  • WINNER: THE GOVERNMENT
  • LOSER: LOUIE

    So what exactly happened here? While Louie started out with a total of $1,482.00 on the table, at the end of the year, and after winning the Pick-3 game, he ended up with just $351.00 in his pocket. This represents a meager return on investment of just 23.7%, or a real world loss of $1,131.00. The government, as usual, was the big winner, walking away with $1,131.00 or 76.3% of all the money!!!

    Many people will at this point cite the fact that Lottery revenue (or profit) goes to fund education, therefore the argument can be made that you are essentially “donating” your money to an admirable cause. Once again, this is not entirely true! Long before the States began to run Lotteries, education was fully funded. Through clever wording, we are led to believe that the money that the Lottery States rake in increases the education budget, but this not the case. The advent of State Lotteries has not measurably added to the pool of funding available to education. Instead, the State budget uses creative accounting to offset this new source of funding. When a State earmarks say $10 Million in Lottery revenue to education, they simply take the same amount that was previously in the existing budget and spend it somewhere else. Sneaky little devils, aren’t they!

    You may wonder how the Lottery States get away with this, and the answer is very simple. By making competition illegal, they are able to create the rules of the game; rules that are entirely unfavorable to the players. Furthermore, they are able to advertise their games to the public using this immaculate deception regarding the allocation of revenue to education. In a free market this business model would not stand a chance, but in a monopolized market, like the one we are forced to “voluntarily” accept by playing their games, this model works quite well. In fact, business is booming, as the 44 combined State Lotteries posted record ticket sales of over $77 Billion in 2018.

    So what is the point of my revealing how the governmental wizards behind the curtain stack the odds against us and walk away with huge profits? Is it my intention to dissuade you from playing the Lottery? Quite to the contrary, my friends! Whether or not you engage in playing your State’s Lottery games is entirely up to you, however, in my humble opinion, knowledge is the most important and powerful tool you can arm yourself with. If you are going to play the Lottery successfully, then it is essential that you comprehend the true odds that you are up against. I fully understand the odds and the nuances of the games, and I play the Lottery every single day. More importantly, I have won Millions of dollars playing these games, and I plan to continue my highly profitable relationship with the bouncing ping pong balls!

    In order to be successful in the arguably “rigged” arena of Lottery play, you must make full use of every possible advantage you can find. My first tip is to always save your losing tickets. What many people are not aware of is the fact that you can write off the cost of your losing tickets against your winnings at the end of each year. While this is of paramount importance for Pro Players, it is also a very beneficial tool that even casual players can employ. For example, let’s say that you won $10,000.00 playing the Lottery this year. Based on the average combined National tax rate of 29.8%, you will be on the hook to pay $2,980.00 on your winnings as this is considered income. If you spent $5,000.00 on non-winning tickets in the same year, you can write them off as a loss leaving you in a position to only have to pay taxes on the remaining $5,000.00 profit, or $1,490.00. For this reason, just because your losing tickets don’t have the winning numbers on them, they still have value, so be sure to save them!

    My second tip is to learn everything you can about the patterns, trends and statistics in your games. By analyzing the day to day results of your games, you will be able to base your wagers on the laws of probability, greatly increasing your chances and your frequency of winning. There are only two ways to win the Lottery: Luck or Skill. You can wait for luck to come your way, but in a game that is stacked 2 to 1 against the player, luck almost always runs out. Skill, on the other hand, is your best defense against the stacked deck you are forced to play. The more time you spend learning everything you can about the games, and applying proven winning systems and techniques to your wagering protocols, the more likely you are to end each year with a profit. There are no short cuts or back doors to Lottery success. If you want to be a consistent winner, then you have to be willing to put in the time to learn how to win. Winning, just like every other proficiency in life, is an acquired skill.

    I like to explain it like this: The only people who cannot drive a car are those who never learned how. The only people who cannot grow a garden are those who never learned how. Consequently, the only people who don’t consistently win their State’s Lottery games are those who never learned how. If you really want to be a winner, then take the time to learn how to do it properly! There are thousands of Pro Players all around the country who regularly smile while holding a fistful of winning tickets, myself included. We are all playing the same games with odds stacked 2 to 1 against us. The only difference between these players and those who are collecting losing tickets is the skill that comes with knowledge.

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GOOD LUCK…Steve Player